Adam Schenck, Principal and Managing Director at Milliman, joins Bilal Little on ETF Central to discuss how the firm is applying its actuarial expertise to tackle rising healthcare costs through new ETF offerings. Schenck explains how Milliman’s Healthcare Inflation Guard and Healthcare Inflation Plus ETFs are designed to track or exceed healthcare inflation using data-driven, multi-asset strategies. He highlights how the firm’s deep experience in health analytics and risk management informs portfolio construction and ongoing adjustments.

From Marine Biology to Managing Healthcare Risk

Adam Schenck’s career path wasn’t exactly linear.

He entered college planning to become a marine biologist. Then computers caught his attention. Then mathematics took over. A professor convinced him to double-major in math, where he discovered a fascination with applying mathematical concepts to real-world problems. One idea, in particular, changed everything: learning that the famous Black-Scholes options pricing model was derived from physics equations used to model heat transfer.

That realization led him to the University of Chicago’s financial mathematics program, where he immersed himself in quantitative finance before receiving a call from a company he had never heard of at the time: Milliman. Twenty-one years later, he’s still there.

Milliman’s Real Business: Understanding Risk

While many investors know Milliman as an actuarial powerhouse, Schenck describes the firm’s mission more broadly: helping institutions understand and manage risk. Founded in 1947 by pension actuaries, Milliman built its reputation through deep expertise in pensions, insurance, healthcare, and financial risk management.

The firm’s healthcare credentials are particularly impressive. Milliman aggregates claims data covering roughly 20% of the commercially insured U.S. population—about 30 to 35 million individuals. That data forms the backbone of many of the healthcare cost indices and actuarial tools used across the industry.

In a world increasingly obsessed with AI and alternative data, Milliman’s edge is surprisingly old-fashioned: decades of proprietary healthcare data and actuarial expertise.

Why Healthcare Inflation Is Different

Most inflation discussions focus on groceries, housing, or gasoline. Schenck argues that healthcare inflation deserves far more attention.

The reason is simple: healthcare costs have consistently risen faster than general inflation for decades.

Milliman’s data paints a sobering picture. In 2005, the annual healthcare cost for a hypothetical family of four was approximately $12,000. By 2025, that figure had climbed to more than $35,000. That represents nearly a tripling of costs over twenty years, driven by compound annual growth rates above 6%.

Unlike many sectors where technology reduces costs, healthcare often becomes more expensive because innovation expands what is possible.

New treatments, genetic therapies, advanced diagnostics, and life-extending medications improve outcomes—but they also require enormous research and development spending. The result is a healthcare system that continually delivers better care while simultaneously becoming more expensive.

As Schenck put it, healthcare inflation rises partly because medicine keeps getting better.

The Retirement Number Most Investors Ignore

The conversation becomes even more striking when retirement enters the picture.

Milliman’s Retiree Health Cost Index estimates that a couple retiring in 2025 will need approximately $588,000 to cover healthcare expenses throughout retirement. That figure includes Medicare, supplemental coverage, and prescription drug costs—but excludes long-term care.

Add long-term care expenses, and the number climbs significantly higher.

Now compare that with retirement savings data.

According to Schenck, the average retirement balance for couples is roughly $600,000, but the median balance is closer to $200,000. In other words, many retirees may not have enough savings to cover healthcare costs alone, let alone housing, food, travel, or other retirement expenses.

That disconnect is what motivated Milliman to explore investment solutions specifically designed around healthcare inflation.

Building ETFs Around a Real-World Problem

Milliman recently entered the ETF market with two actively managed strategies:

• The Milliman Healthcare Inflation Guard ETF (MHIG)
• The Milliman Healthcare Inflation Plus ETF (MHIP)

Both funds are designed around a specific objective: tracking or exceeding healthcare inflation.

The Guard ETF aims to match healthcare inflation while minimizing downside risk. The Plus ETF takes a more aggressive approach, targeting healthcare inflation plus an additional return premium over time.

Rather than relying on traditional healthcare sector investing, the strategies use Milliman’s proprietary healthcare datasets to determine portfolio construction. Every month, the firm recalculates healthcare inflation metrics and adjusts portfolio allocations accordingly.

The objective is not to beat the S&P 500. It is to help investors keep pace with one of the fastest-growing expense categories they are likely to face.

What’s Actually Inside the Portfolio?

The portfolios are more sophisticated than a simple basket of healthcare stocks.

Milliman allocates across several categories:

Healthcare Equities

The firm analyzes pharmaceutical sales data, healthcare claims data, hospital systems, medical device manufacturers, insurers, and other healthcare-related businesses. Those allocations are informed directly by underlying healthcare spending trends.

Broader Market Exposure

Because inflation is influenced by factors beyond healthcare, the portfolios also maintain exposure to non-healthcare sectors of the broader economy.

Gold as an Inflation Diversifier

Milliman uses gold as a liquid alternatives sleeve. Schenck’s reasoning is practical: central banks around the world continue to hold gold as a reserve asset, giving it a unique relationship to inflation.

Interestingly, he also acknowledged that future alternatives could evolve. If central banks eventually begin holding Bitcoin in meaningful reserve allocations, Milliman would evaluate whether that belongs in the portfolio.

Treasury Securities

The final component is a treasury allocation designed to reflect wage inflation trends, particularly within healthcare labor markets. Since labor costs are a major driver of healthcare expenses, treasury positioning serves as an important risk-management mechanism.

The Case for Starting Earlier

One of the strongest messages from the conversation was that healthcare planning should begin much earlier than most people think.

Schenck believes investors should calculate future healthcare expenses now—not ten years before retirement. Milliman has already developed calculators that estimate future healthcare obligations based on age, retirement plans, state of residence, and current health status.

His recommendation is straightforward: create a dedicated healthcare savings sleeve within your retirement portfolio and revisit those assumptions regularly as circumstances change.

AI Won’t Solve Everything

While artificial intelligence is already transforming healthcare through diagnostics, medical documentation, and research, Schenck cautions against assuming that AI will automatically reduce healthcare costs.

The reality is more nuanced. AI may improve efficiency, but breakthroughs often create new treatment possibilities, new therapies, and new expenses. Better medicine can sometimes mean higher costs before efficiencies eventually emerge.

That tension sits at the heart of Milliman’s thesis: healthcare innovation is improving lives, but investors need a plan for paying for it.

A New ETF with an Old Soul

When asked how investors should think about Milliman entering the ETF industry, Schenck offered a simple description: the firm may be new to ETF sponsorship, but it is an old soul in healthcare and risk management.

That may be the best summary of the launch.

While many ETFs chase themes, trends, or market narratives, Milliman is attempting to solve a tangible financial planning problem. Whether these products ultimately succeed remains to be seen, but the challenge they address is difficult to ignore.

Healthcare inflation isn’t just another line item. For millions of Americans, it may become the defining financial challenge of retirement.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.